October 24, 2017

Hillstrom's Optimizer: Productivity

We have our base case:

If we optimize for year one performance and then invest that way going forward (which is what almost all of you indirectly try to accomplish), we get this solution.

The business isn't going anywhere by the end of year five, is it? It's optimized, but it is optimized on to a local maxima. There are many other ways to get better results, but you have to sub-optimize early on in order to get optimal results later.

But that's not the topic of our post today.

Can I show you something?

What happens if we increase Merchandise Productivity by 10%, and hold Merchandise Productivity at +10% for five years?

Over the course of five years, cumulative Earnings Before Taxes increased by +/- 60% ... all from a 10% increase in Merchandise Productivity.

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Kevin Hillstrom, President, MineThatData

Kevin is President of MineThatData, a consultancy that helps CEOs understand the complex relationship between Customers, Advertising, Products, Brands, and Channels. Kevin supports a diverse set of clients, including internet startups, thirty million dollar catalog merchants, international brands, and billion dollar multichannel retailers. Kevin is frequently quoted in the mainstream media, including the New York Times, Boston Globe, and Forbes Magazine.

Prior to founding MineThatData, Kevin held various roles at leading multichannel brands, including Vice President of Database Marketing at Nordstrom, Director of Circulation at Eddie Bauer, and Manager of Analytical Services at Lands' End.

You may contact kevin at kevinh@minethatdata.com.

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